UPS reserves 125 Tesla semi-trucks, largest public pre-order yet

DETROIT (Reuters) - United Parcel Service Inc (UPS.N) said on Tuesday it is buying 125 Tesla Inc (TSLA.O) all-electric semi-trucks, the largest known order for the big rig so far, as the package delivery company expands its fleet of alternative-fuel vehicles.

Tesla is trying to convince the trucking community it can build an affordable electric big rig with the range and cargo capacity to compete with relatively low-cost, time-tested diesel trucks. This is the largest public order of the big rig so far, Tesla said.

Tesla unveiled its semi last month and expects the truck to be in production by 2019.

The Tesla trucks will cost around $200,000 each for a total order of about $25 million. UPS expects the semi-trucks, the big rigs that haul freight along America’s highways, will have a lower total cost of ownership than conventional vehicles, which run at about $120,000.

Tesla has received pre-orders from such major companies as Walmart (WMT.N), fleet operator J.B. Hunt Transport Services Inc (JBHT.O) and food service distributor Sysco Corp (SYY.N)

Prior to UPS, the largest single pre-order came from PepsiCo Inc PEP.N, for 100 trucks.

UPS said it has provided Tesla with data on how its trucks function on their real-world routes in order to evaluate how the vehicle should perform in its fleet.

“As with any introductory technology for our fleet, we want to make sure it’s in a position to succeed,” Scott Phillippi, UPS senior director for automotive maintenance and engineering for international operations, told Reuters.

Phillippi said the 125 trucks will allow UPS to conduct a proper test of their abilities. He said the company was still determining their routes, but the semis will “primarily be in the United States.” Tesla will provide consultation and support on charging infrastructure.

“We have high expectations and are very optimistic that this will be a good product and it will have firm support from Tesla to make it work,” Phillippi said.

About 260,000 semis, or heavy-duty Class-8 trucks, are produced in North America annually, according to FTR, an industry economics research firm.

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Including the UPS order, Tesla has at least 410 pre-orders in hand, according to a Reuters tally.

Navistar International Corp (NAV.N) and Volkswagen AG VOWG-P.DE hope to launch a smaller, electric medium-duty truck by late 2019, while rival Daimler AG (DAIGn.DE) has delivered the first of a smaller range of electric trucks to customers in New York.

In afternoon trade on Nasdaq, Tesla shares were down nearly 1.1 percent at $335.24.